but on the other hand, it was very much a case of intention =/= outcome, and I found the outcome very upsetting.

It's an upsetting outcome! Even beyond the only-queer-character-is-a-terrible-person problem, the spell/possession aspect described by both you and skygiants seems iffy even for a cis female character and for a trans male character is right out.

(Also, the more I think about it, the more that race-passing and gender-passing don't quite seem appropriate to present as the same thing in the first place...?)

I don't think they are interchangeable. (I can imagine a different book saying something about the ways in which they are not.)